Reporting cash gift from foreign relatives

Dear Tax Talk,
I am a little puzzled about the requirements of reporting cash gifts from foreign relatives. Specifically, I'm inquiring about receiving cash/monetary gifts from foreigners (not U.S. citizens or permanent residents) and the filing requirement (Form 3520) to the IRS.

If a grandma gives my son $85,000 and my mom gives me $50,000 in the tax year 2014, must the cash gifts be reported to the IRS? Thanks.
-- Lena

Dear Lena,The IRS filing requirements for Form 3520 for certain foreign gifts apply to U.S. persons who have received more than $100,000 in gifts or bequests during the current year from a nonresident alien individual or a foreign estate.

In calculating the $100,000, you have to also include gifts or bequests from foreign persons related to that nonresident alien individual or foreign estate. This means that for each U.S. individual, you have to include all gifts from different foreign nonresident aliens and foreign estates that are related to one another. This includes your brothers, sisters, parents, grandparents, lineal descendants such as your children or grandchildren and the spouses of any of those persons. In other words, if you received more than $100,000 from related nonresident aliens, you would have to aggregate all the amounts together and thus have to file the form.

Example

You receive $85,000 from your foreign mother. The gift is not more than $100,000, so no form is required. But if you were to receive $25,000 from your foreign brother also, then the gifts from foreign-related individuals must be aggregated and you would be required to report the income.

In your situation, you and your son are considered to be two separate individuals, so each of you can receive up to $100,000 before you are required to file Form 3520.

As you can see, the IRS reaches as far as it can in the calculation of the $100,000 limit.

Thanks for the great question.

Ask the adviser

To ask a question on Tax Talk, go to the "Ask the Experts" page and select "Taxes" as the topic. Read more Tax Talk columns.

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

Judy O'Connor has been a practicing CPA for more than 25 years in the South Florida community and assists her diverse client base in all aspects of tax compliance at a local, state and federal level. Her clients consist of individuals, corporations, limited liability companies, partnerships and estates.

Bankrate wants to hear from you and encourages thoughtful and constructive comments. We ask that you stay focused on the story topic, respect other people's opinions, and avoid profanity, offensive statements, illegal contents and advertisement posts. Comments are not reviewed before they are posted. Bankrate reserves the right (but is not obligated) to edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused. We do not permit the inclusion of hyperlinks in comments and may remove any comment that includes a hyperlink.

Bankrate.com is an independent, advertising-supported publisher and comparison service. Bankrate may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on certain links posted on this website.